Lower Costs. Emerging-market
medtech companies still have lower costs than their Western competitors. (See Exhibit 3.) Mindray,
for example, can sell a midtier
ultrasound product in China at a
discount to multinational competitors while maintaining profitability
and a positive customer experience, and devoting 10% of revenues to R&D.

This advantage will likely persisteven as multinationals build man-ufacturing and R&D operationsin emerging markets. For manyproducts, local companies spendless on nonessential elements thando multinationals, which are oftenintent on maintaining their brand-ing edge. For example, MRI ma-chines built by emerging-marketmedtech companies are often lessvisually appealing because they useless expensive material and offerfewer costly bells and whistles, buttheir functionality is good enoughfor most medical practitioners.

Because lower- to mid-tier products are less costly to engineer,
the R&D operations of emerging-market medtech companies are
also less costly than those of their
multinational competitors. This
advantage, however, may diminish
for sophisticated products developed by more expensive talent.

LOCALIZED PRODUCTS

Emerging-market companies are
often more successful than multinationals at tailoring their products to local needs and constraints.
China’s Mindray has a presence in
nearly three-quarters of all medical
organizations in India. The company conducted deep customer
research in India, established local
operations, hired local employees, and tailored its line of patient
monitoring, ultrasound, and IVD
equipment to address local unmet
needs. For example, it recruited
local engineers and operators to
provide 24/7 customer service and
built a local marketing and sales
team.